Do dues-paying members get higher grades than non-members? Many people think of the Better Business Bureau as a consumer watchdog, but a report by CNN Money finds the organization has given top ratings to companies that have faced action by government regulators and lawsuits by angry consumers... BBB also notes that it does not identify itself as a consumer watchdog, but rather as a mediator between businesses and consumers.

Do dues-paying members get higher grades than non-members?

Many people think of the Better Business Bureau as a consumer watchdog, but a report by CNNMoney finds the organization has given top ratings to companies that have faced action by government regulators and lawsuits by angry consumers.

In an extensive report, CNN Money raises questions about the organization's rating procedures and cites the case of Military Credit Services. It enjoys an A- rating, even after being sued for allegedly illegal debt collection practices and ordered to refund $2.7 million to borrowers.

The CNN report quotes Virginia Attorney General Mark Herring, who joined with federal regulators in prosecuting the case, as saying the BBB "may want to take a second look" at the company's high rating.

Military Credit Services, CNN notes, is a dues-paying member of the BBB. It cites numerous other companies that enjoy high ratings despite successful prosecutions and lawsuits and suggests that members tend to enjoy higher grades than those who don't cough up annual dues ranging as high as $10,000.

The organization's revenue last year totaled nearly $200 million, most of it from dues, CNN said.

Defending reviewing practices

In its defense, the BBB says it carefully reviews businesses before inviting them to become members. It says that grades are calculated using more than a dozen factors, including the type of company, length of time in business, and complaint volume in relation to its size.

"Accredited Businesses have a special responsibility to maintain the ratings they've earned," BBB Council President Mary Power said in a written statement to CNN, after declining to be interviewed in person. "This ensures that BBB ratings are consistent with our goals as an organization: to flag substandard behavior, but also to encourage businesses to adopt best practices and earn better grades."

BBB also notes that it does not identify itself as a consumer watchdog, but rather as a mediator between businesses and consumers.

By James R. Hood ConsumerAffairs' founder and former editor, Jim Hood formerly headed Associated Press Broadcast News, directing coverage of major news events worldwide. He also served as Senior Vice President of United Press International and was the founder and editor of Zapnews, a newswire service for radio and television. Read Full Bio→